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Tse, Michael --- "The e-factor" [2005] MonashBusRw 21; (2005) 1(2) Monash Business Review 46

The e-factor

Michael Tse

E-business and e-commerce are now common terms, but what do they really mean, asks Michael Tse.

Electronic business (e-business) and electronic commerce (e-commerce) are broad terms that stretch to include any business using computing and telecommunication technologies, especially the internet. However, despite the fact that a whole new paradigm of business and commerce rests on the shoulders of these two terms, no generally accepted definition of them exists. In the parlance of the Australian film The Castle, defining e-business and e-commerce these days is a ‘vibe thing’ making it extremely difficult, if not impossible, to arrive at a consensus.

The term e-business was popularised in the late 1990s by large corporations like IBM. While most people seem to agree with a broad concept of ‘conducting business electronically’ individual interpretations of ‘conducting business’ and ‘electronically’ vary significantly; suffice to say e-business is loosely defined as ‘conducting business on the internet’. The term e-commerce on the other hand can be traced back to the early 1990s as a sub-set of e-business and describes organisations that interact with customers primarily through the internet.

Today the whole thing is a bit of a word salad with some people using e-business and e-commerce interchangeably, some using one or the other thus implying they have the same meaning and others using the two terms with different meanings. It’s not rocket science to see the potential for confusion. To make matters worse, some individuals and organisations have multiple definitions of the terms like the Department of Communications, Information Technology and the Arts (DCITA) in Australia that features different definitions of e-business and e-commerce in different parts of its website.

Activity versus entity

And just when you thought that was enough, consider the confusion between the activity concept and the entity concept. E-business and e-commerce are often defined as electronic business activities rather than a type of organisation. Nevertheless, Amazon and eBay are commonly cited as examples of e-business (or e-commerce) and activities performed by these organisations like online retailing and online auction are regarded as business models. In other words, people define the two terms as an activity concept but use them as an entity concept. Confused?

New definitions – the value-centric approach

To clear up this mess I propose a brave new world of clarity featuring a value-centric approach, or one drawn from the objective of all organisations to create value by producing goods, services or information.

e-business

Under a value-centric approach, an e-business is an organisation which applies computing and telecommunication technologies jointly to the activities through which its products or services are created and delivered – its value chain. For example, a convenience store using a computer to play music downloaded from the internet is not an e-business because playing in-store music is not related to its value chain. However, a record shop that plays music it sells from a system linked to its corporate intranet is an e-business because playing music is part of the promotional activities that constitute its value chain.

e-commerce

e-commerce is defined as an organisation with a value proposition that relies on joint applications of computing and telecommunication technologies. In other words all i nternet-based organisations that perform operational activities without physical interactions with their clients are e-commerce organisations because the value they create and their point of difference in the market place are based on their virtual operations.

As e-commerce organisations rely on computing and telecommunication technologies in their operations, they are all e-business organisations. The key differentiator of an e-business organisation and e-commerce organisation is the value proposition. Applying technologies in similar ways does not necessarily mean that value propositions are the same so an e-business organisation can operate identically to an e-commerce organisation. So, a computer shop that sells computers through both physical storefront and the internet can either be an e-business organisation or e-commerce organisation. If the internet operations are considered as supplementary to physical operations then the company is an e-business. If the physical storefront is operated to support and facilitate Internet operations, then the company is an e-commerce.

Examples of e-business and e-commerce

Dell Inc.

Dell is a great example of how an organisation transforms its value proposition with computing and telecommunication technologies to become an e-commerce organisation. The company was established in 1984 by Michael Dell, a 20-year-old college student, to sell custom-built personal computers directly to customers. Today Dell is one of the largest personal computer manufacturers in the United States and one of the world’s most successful online retailers, accounting for 48 per cent of all computer sales on the Internet in 2002. Dell creates value in three ways:

A. there is no middleman

B. products are built on demand

C. it looks for suppliers who have excess inventories they want to sell at a lower price

In 1994, Dell established its website www.dell.com, and by 1996 daily online sales topped US$1 million. The application of technologies creates its distinct value with the internet being one of the major channels to maintain direct communication with customers. The reach and efficiency of internet communication allow it to serve more customers than traditional channels.

Charles Sturt University

Charles Sturt University (CSU) is a successful example of transforming an existing business into an e-business. As the leading distance education provider in Australia and the largest regional university in New South Wales, CSU has successfully augmented rather than replaced its traditional education system with computing and telecommunication technologies. Students enrolled in distance education subjects receive study materials in printed form, which are also available through CSU’s online portal, my.csu.

To communicate with their lecturers, students use telephone, fax, e-mail and online forums. They submit their assignments by mail, by fax or by EASTS, an online assignment submission system. The university recognises its strengths in creating value and used computing and telecommunication technologies to reinforce these strengths; now technology-enabled systems co-exist with traditional systems to enhance each other’s value.

Cite this article as

Tse, Michael. 'The e-factor'. Monash Business Review. 2005.; Monash University ePress: Victoria, Australia. http://www.epress.monash.edu.au/. : 46–47. DOI:10.2104/mbr05021

About the author

Michael Tse

Michael.Tse@buseco.monash.edu.au

Michael Tse (MCom UNSW, BA Essex, CMA) is an assistant lecturer in the Department of Accounting and Finance at Monash University. His current research interests are in management accounting, electronic commerce and business education.


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